Mobile banking: whose hands on your money?

Rupert Goodwins
Written by Rupert Goodwins

It’s not big yet but it’s getting bigger. The Economist reckons that about 15 percent of retail banking transactions are made on mobiles, going up to 25 percent by 2021. The banks know they have to play along; what they also know, but don’t talk about, is that mobile banking could mean the end of their reason to exist at all.

Banks are like God and politicians – easier to believe in if you don’t think about them too much.

They keep your money safe and move it around for you? Well, yes, but what does that mean? Your money is data in a bank’s computers. Once upon a time, those were bigger and cleverer than anyone else’s. These days, your mobile is streets ahead – it doesn’t rely on stuff written in the 1980s that nobody dare fix. And banks do move money around but only from one computer to another. When you make a payment, a bank just sends a message to another bank – or even to itself. It certainly likes to cream a bit off whenever it can You may have noticed that your mobile is quite good at sending and receiving messages too, and rarely keeps any for itself. Mobile banking proves that banks are still 19th century institutions trying to look good in the 21st.

Mobile banking turns money itself into an app. You can do your banking in exactly the same way as you message your friends on WhatsApp or buy stuff from Amazon. And despite themselves, the banks are having to compete for your attention by emulating the techniques of the big mobile players. The trouble for them is that one of the rules of Internet commerce is that there is normally only one winner. Because it’s so easy to switch between competitors, critical mass builds up behind the best really quickly, and it’s almost impossible to shift. There is Amazon, and there is – well, who? There is Google and there is – Bing? Yahoo? You’re having a giraffe, my son.

And so the cosy world of retail banking, where the market is split between a few big names operating at roughly the same level of incompetence and cupidity, can’t survive the onslaught of mobile. Apple Pay and Google Wallet are training us that moving money around doesn’t need you to talk directly to a bank at all once you’ve set things up, because it’s just another thing your mobile does. Currently, these payment apps need banking partners: one day, a service that supports all the mobile and online stuff but doesn’t have any of the overhead of a traditional bank, will quietly slip in behind such apps and finish the job. Why wouldn’t your employer just bung your salary into your mobile wallet, if it’s cheaper and works better for everyone?

We already have the technology for this, with the secure and incorruptible blockchain system that Bitcoin uses. The banks are scrambling to equip themselves with this, and are hoping the regulators will protect them from outside competition while they evolve: the regulators may not be as compliant as once they would have been.

There’s a way to go yet, and plenty of problems to fix, but mobile banking will put your money in your hands, and out of the banks’. Enjoy the show.

photo credit: El Productor: La verdad sobre un rol distorsionado via photopin (license)

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Rupert Goodwins

Rupert Goodwins